Debt Is a Trap That Will Hold You Back From Building Wealth

Summary

Podcast Summary: The Ramsey Show – "Debt Is a Trap That Will Hold You Back From Building Wealth"

Release Date: December 3, 2024
Host: Dave Ramsey
Co-Host: Rachel Cruz

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Overview

In this episode of The Ramsey Show, host Dave Ramsey and co-host Rachel Cruz delve deep into the pervasive issue of debt and its detrimental impact on individuals striving to build wealth. Through a series of listener calls, they address various debt-related challenges, offering actionable advice grounded in Ramsey's renowned financial principles. The episode emphasizes the psychological barriers of debt, critiques conventional financial advising practices, and reinforces the importance of disciplined budgeting.

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Key Discussions

1. Paying Off the Mortgage Early

Caller: Carol from New York City

Carol reaches out seeking guidance on paying off her $800,000 mortgage before her husband’s upcoming retirement. Despite her financial advisor's recommendation to maintain the low-interest mortgage and continue investing, Carol is determined to eliminate her mortgage debt.

• Dave's Analysis (01:57): Dave explains the potential pitfalls of Carol’s financial advisor’s strategy, particularly pointing out that bonds, recommended by her advisor, might not be performing well in the current rising interest rate environment. He suggests that the bonds Carol holds are likely undervalued due to interest rate hikes since their purchase during a lower rate period.

• Notable Quote (03:32):
  Dave Ramsey: "I'm not ready to fire this guy, but I'm close... his approach is very typical in the financial advising world... it's subversive arrogance."

2. Managing Debt Between Partners

Caller: Jake from Savannah, Georgia

Jake discusses his and his fiancé's combined debt of $40,000 and their differing attitudes toward debt repayment. While Jake is committed to aggressively paying off debt to provide a stable future for their upcoming child, his fiancé prioritizes maintaining payments for lifestyle choices.

• Dave's Advice (34:15): Dave underscores the necessity for both partners to align their financial goals. He emphasizes that without mutual agreement, achieving financial freedom becomes significantly more challenging.

• Notable Quote (34:15):
  Dave Ramsey: "The more deeply you understand and believe that by getting this paid off... the more disciplined you'll be."

3. Tackling Medical Debt

Caller: Crystal from Tampa

Crystal shares her struggle with $5,000 in medical bills amidst their debt snowball. She seeks advice on integrating medical debt into her existing repayment plan.

• Dave's Strategy (38:13): Dave advises incorporating the medical bills into the snowball list, emphasizing the emotional satisfaction of eliminating smaller debts first to build momentum.

• Notable Quote (70:01):
  Dave Ramsey: "It's going to be a long road. But can I just say... it's not bankruptible? No. Is it going to keep you from building wealth completely? No."

4. The Issue with Aggressive Credit Card Marketing and Over-Accumulation

Discussion: Corey and Other Callers

Dave highlights the aggressive marketing tactics of credit card companies, illustrating how they exploit consumers with easy payment plans that ultimately lead to deeper debt.

• Notable Quote (24:20):
  Dave Ramsey: "Debt is the most aggressively marketed product... Credit cards are the most aggressively marketed product out there."

5. Excessive Spending Despite High Income

Caller: Sarah from Boston

Sarah, earning over $150,000 annually with no debt, finds herself struggling with unnecessary spending habits that hinder her ability to save and invest effectively.

• Dave's Solution (44:07): Dave recommends implementing a detailed budget using the EveryDollar app to assign every dollar a purpose, thereby reducing impulsive spending and enhancing financial control.

• Notable Quote (44:07):
  Dave Ramsey: "Give every dollar an assignment before the month begins. On your budget... you cannot go to Amazon unless it's to buy something you budgeted for."

6. Financial Boundaries with Family

Caller: Lucy from Nebraska

Lucy seeks advice on declining her children's request for a mortgage to purchase a rental property, despite having no bills and her house being paid off.

• Dave's Stance (55:14): Dave firmly advises against co-signing mortgages for family members, labeling the proposition as "dumber than crap" and stressing the potential financial and relational risks involved.

• Notable Quote (55:14):
  Dave Ramsey: "We do not tell people to go into debt in baby step seven to buy a luxury upgrade... It just screams stupidity really loud."

7. Dealing with an Upside-Down Car Loan and Student Debt

Caller: Erica from Philadelphia

Erica is trapped in a high-interest car loan of $20,000 for a 2020 Chevy Malibu, which has depreciated significantly. Additionally, she carries $200,000 in student loans for her master's degree in marriage and family therapy.

• Dave's Recommendations (70:01): Dave emphasizes the urgency of eliminating such high-interest debt by drastically reducing expenses and increasing income, even if it means significant lifestyle sacrifices.

• Notable Quote (75:05):
  Dave Ramsey: "You can't keep doing the same thing over and over again. Expect a different result. That's the definition of insanity."

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Insights and Conclusions

• Critique of Conventional Financial Advice: Dave Ramsey challenges standard practices like reducing mortgage payments in favor of investments and investing heavily in bonds, especially in a fluctuating interest rate landscape. He argues that such advice often serves the interests of financial advisors more than the clients'.

• Psychological Impact of Debt: The episode underscores the mental and emotional strain that debt imposes, advocating for proactive debt elimination as a pathway to financial peace and stability.

• Importance of Budgeting: Consistent emphasis is placed on disciplined budgeting, with tools like the EveryDollar app being highlighted as essential for assigning purposes to every dollar, thereby preventing impulsive and unnecessary expenditures.

• Debt Snowball Methodology: The debt snowball approach remains a cornerstone of Ramsey's advice, promoting the elimination of smaller debts first to build momentum and confidence in debt repayment efforts.

• Avoiding High-Interest Debt: High-interest debts, such as credit cards and certain car loans, are portrayed as particularly harmful, urging listeners to avoid them wherever possible to prevent long-term financial setbacks.

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Notable Quotes

1. Dave Ramsey (03:32):
   "I'm not ready to fire this guy, but I'm close... his approach is very typical in the financial advising world... it's subversive arrogance."

2. Dave Ramsey (24:20):
   "Debt is the most aggressively marketed product... Credit cards are the most aggressively marketed product out there."

3. Dave Ramsey (34:15):
   "The more deeply you understand and believe that by getting this paid off... the more disciplined you'll be."

4. Dave Ramsey (44:07):
   "Give every dollar an assignment before the month begins. On your budget... you cannot go to Amazon unless it's to buy something you budgeted for."

5. Dave Ramsey (55:14):
   "We do not tell people to go into debt in baby step seven to buy a luxury upgrade... It just screams stupidity really loud."

6. Dave Ramsey (75:05):
   "You can't keep doing the same thing over and over again. Expect a different result. That's the definition of insanity."

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Conclusion

This episode of The Ramsey Show serves as a clarion call against the pervasive trap of debt, emphasizing disciplined financial management as the key to true wealth-building. Through real-life examples and steadfast advice, Dave Ramsey and Rachel Cruz guide listeners toward reclaiming their financial freedom by breaking the chains of debt, aligning financial goals within families, and rejecting flawed conventional financial paradigms.

Transcript

[Rachel Cruz]

Hey you guys, Cyber Monday deals are here. So shop meaningful Christmas gifts that won't bust your budget. Right [e-mail] store.

[Dave Ramsey]

Live from the headquarters of Ramsey Solutions, it's the Ramsey show where we help people build wealth, do work that they love and create actual amazing relationships. Number one, best selling author Rachel Cruz, Ramsey personality co host of the Smart Money Happy Hour is my co host today. My daughter. Open phones at 888-825-5225. Carol is with us. Carol is in New York City. Hi Carol. Welcome to the Ramsey Show.

[Carol]

Hello. Thank you so much for taking my call. It's a thrill to talk to you all.

[Dave Ramsey]

You too. What's up?

[Carol]

I have a husband who's retiring within the next 12 months and we'd like to finish paying off the mortgage on the house.

[Dave Ramsey]

Good.

[Carol]

Yes, but per your advice and our financial advisor is advising us not to because the mortgage is at under 3% and our investments are doing well above that. However, that doesn't matter to us. We want to plow ahead and get this done. And our next question to him is how can we best divest of our investments and pull the money out, make the cash available to do this. And his next tier of advice is to pull from our bonds that are earning at tax free rates as opposed to pulling from our mutual funds that we'll have to pay capital gains taxes on. What do you suggest we do?

[Dave Ramsey]

You probably got no gain on your bonds. Their probably value is down even though the coupon rate stayed the same. But as interest rates rise, bond values go down. And so my guess is that you bought them during a lower interest rate environment. So they're probably not even worth what you paid for them today, is that right?

[Carol]

I'm not sure. That's a good question.

[Dave Ramsey]

I don't think you're going to have any gain to amount to anything. So I like his advice on that basis.

[Caller]

Okay.

[Dave Ramsey]

And what is your total nest egg?

[Carol]

4 million.

[Dave Ramsey]

Okay. And how much is the mortgage?

[Carol]

800,000.

[Dave Ramsey]

Okay, good. And you guys are how old?

[Carol]

69 and 67.

[Dave Ramsey]

Cool. And how much have you got in.

[Carol]

These bonds that I don't know. That's a good question.

[Dave Ramsey]

Is about 800 is enough to do this?

[Carol]

I think so. Yes. Yes. By the way he was talking about it, I wasn't that, not that specific with him.

[Dave Ramsey]

Okay.

[Rachel Cruz]

Is he the one that put you guys in the bonds, Carol, to begin with or was that something that you had?

[Carol]

Yes. No, he's, he's been, we've been with him for our entire working career.

[Rachel Cruz]

Okay.

[Dave Ramsey]

Okay. Yes, I agree with his advice on that. I would use the bonds first to answer your question.

[Caller]

Okay.

[Dave Ramsey]

Okay. This guy, you need to be aware of a couple things here with this guy. I'm not quite ready to fire him, but I'm close.

[Carol]

Right, Okay, I hear you.

[Dave Ramsey]

Number one, because he, his job is not to take his glasses on the end of his nose and speak down to you little people who have $4 million and you shouldn't be paying off your mortgage. Listen to the wise financial advisor because bull crap. His job is to say, okay, what are your goals and how can I help you accomplish them?

[Carol]

Yes.

[Dave Ramsey]

So I don't like his approach to this. And it's very typical in the financial advising world, this level of arrogance, it's just below the. It's not, it's not overt arrogance, but it's a subversive arrogance.

[Rachel Cruz]

But this advice is very prominent amongst the other.

[Dave Ramsey]

Yeah, it's a standard. It's a standard. That's the I've got with him is he'd use two. He did two very standard things in the financial world that I completely disagree with. One is he told you not to pay off your mortgage. And the second is he put you in bonds.

[Carol]

Right.

[Dave Ramsey]

And so these bonds, you, you know, you have a fourth of your money tied up in something that's substantially underperforming because of this guy.

[Carol]

Right, gotcha. Okay.

[Dave Ramsey]

And that's these bonds. So I'm. And because here's the thing again, the simple thing to remember about bonds is this in the financial advising world, we have been taught, and everyone for some reason decided to agree with it rather than actually making their own decisions. But the people like me and him that are trained in this stuff, we've been taught that as you get older, we use what's called the asset allocation methodology or theory, and that as you get older, you should be in less and less and less risk. And so that by the time your age, you should largely be in bonds and money markets and have very little inequities. Okay. The problem is that everybody just accepted this as if it's a fact. It's not a fact, it's a theory, it's an idea. And I disagree with it. I'm 64, I have 0 in bonds and almost the same amount in money markets. I got a little bit in money markets just because I like some cash, but I'm not sitting in. I haven't moved everything away from equities because as you get older, you should limit Risk, because that's horse crap. If I live to 94 and I'm 64 and I've been in an instrument making 8% instead of an instrument making 12 or 14, the amount of money I've lost during that 30 years is millions. So it's bad advice. Assess that allocation methodology. It's bad advice. And so he puts you in these bonds. The second thing you need to know about bonds is that they, they are not legitimately safer than stocks or mutual funds. Okay. Because when you track the volatility of bond values versus the volatility of bond of mutual fund stock values, they're very similar. It's not safer. It's really not. And the reason is the third thing. And then I'll let you go. Okay? Is this thing. But I mean, it's teaching for everybody out there.

[Rachel Cruz]

That's good. It's good.

[Dave Ramsey]

It's everybody out there.

[Carol]

Thank you.

[Dave Ramsey]

Bonds. The thing you remember about bonds is there's a set interest rate on the bond. So when interest rates rise in order to achieve that same that a higher. Let's say you got a 4% rate and interest rates are 7, but. And so people are expecting 7, but your bond is only paying 4. So the value of your bond goes down as interest rates rise. It goes up as interest rates fall. Bond prices are exactly inverse to the prevailing interest rate market. So in a rise in a record low in the last 100 years, we had a unprecedented 3% interest rate environment for a decade, right? Yes. And in the middle of the lowest interest rate environment in known history, this guy puts you in bonds. And where is it going to go from the lowest in interest rate environment in history up. As interest rates go up, your bond values go down. And so I'm afraid you may have actually lost money on these bonds when you get into them, but I'm hoping you at least broke even. That's what I'm hoping. So interest rates, folks, at bond prices, the value of a bond goes down as interest rates rise. So you never would buy bonds in an, a rising interest rate environment. You would buy them in a falling interest rate environment if you were going to buy bonds at all. And that's because of the yield on the bond has to ask to approximate the prevailing rate. And yet the coupon rate is fixed.

[Rachel Cruz]

Yeah. And I think one of the most important things we've learned with the financial advisor is exactly what you said at the top of this is that here are my goals. And if they're not respecting or hearing that, they're going to. They're going to do the inverse of that.

[Dave Ramsey]

Right. Where else have I got to figure out that you're giving me bad numbers?

[Rachel Cruz]

That's right.

[Dave Ramsey]

You know, y. So I. I'm. I'm not ready to fire this guy, but I really dislike bonds for him from him. And I dislike his mortgage advice and it. And I dislike that he's kind of telling you what to do instead of asking you what you want to do. This is the Ramsey Show. I've been doing this show for over 30 years, and some of the saddest calls I have taken are from situations that are completely preventable. Yeah.

[Rachel Cruz]

And what's so hard is I feel like one of those, especially the ones that I'm like, oh, it's terrible air people that call in and their spouse has passed away suddenly and they don't have life insurance. When you have to think through, how am I going to pay my bills?

[Dave Ramsey]

How about next week?

[Rachel Cruz]

Yeah. In the middle of all that grief, like, it's just. It is. It's terrible. So life insurance is the one thing, especially as a mom with three little kids that I'm, like, so big on for people to get because it's inexpensive. Zander is the place that Winston and I actually get all of our life insurance.

[Dave Ramsey]

And it doesn't cost much because Zander shops among a gazillion different companies. It doesn't cost much. You just have to admit that someday you're not going to be here. You got to say it out loud, and you got to say, I'm going to say I love you to my family by taking care of them and taking the time to put this stuff in place. The cost of stinking pizza. To get a free quote, call 800-356-4282. That's 800-356-4282. Or go to zander.com so I remember the year you were born, Rachel. I was standing in line at Kroger in. At the corner of Bell Road and Murfreesboro Road over there in Priest Lake where we used to live back in the day. Those of you in the Nashville Market will know that intersection. I think that Kroger is probably gone now. It was 30 plus years ago. Right. So. And I'm standing in line and I'm buying basic groceries. Not with your mom and a baby or two in tow. And we weren't really spending, like, a ton of money and we weren't buying anything frivolous. It was just meat and potatoes just to feed the family. Right. We Were broke. And I remember as I'm back in those days, you would write a check, not use your debit card. And as I'm writing the check, I'm wondering if by buying these groceries, if there's going to be enough money left in the account to pay the electricity bill. And I didn't know, but I bought the groceries anyway, of course. And then just kind of on a hope and a prayer, get home and everything works out and I can pay the light bill. Right. The reason I remember that specific experience is I think it's the last time that ever happened because I started doing. Right after that, Sharon and I, your mom and I started doing a written budget before the month begins. And we knew we had a certain amount of money to spend on groceries. And that by spending that money, we weren't worried about everything else, about everything else because we knew it fit in the overall because that was a line item and the electricity was a line item. So we knew we didn't spend the electricity money on groceries or vice versa. We didn't worry because it was all laid out. We had a plan. And the amount of peace that we got having the month laid out, as long as we stayed within those guidelines, we knew it was the whole thing was going to work. Instead of going from anxiety to anxiety to anxiety, every time you're paying a bill, there's a freak out, a question.

[Rachel Cruz]

Always in the back of is this okay?

[Dave Ramsey]

Am I okay?

[Rachel Cruz]

Is this okay?

[Dave Ramsey]

And even later on, when we started having some money, buying something, a luxurious item, is this okay? And you've got to go, well, is it okay? And does it fit in this written out plan where every dollar has been giving an assignment, Folks, if you want to have that change of experience in your life, where you go from when I'm doing something as basic as grocery shopping and that being anxiety, an anxiety event, going from that to peace. The only step that does that is a written plan, a detailed plan, and that's called a budget. Before the month begins, you're giving every dollar an assignment. You and your spouse agree to it and then you stick to it. And that way the electricity gets paid and the groceries get bought and the kids can have shoes and no one died. Yeah, you know, you know, it's just like, yeah, it's a thing. Most people though have that experience standing in the grocery line, crap, I don't know when I finish this if we're okay.

[Rachel Cruz]

Oh, yeah, well, and there's a thought too that a lot of people have that think, okay, if I know, and I plan out and I do a budget and I see a number in a specific line item, like groceries, then I can't just go and spend whatever I want. And that doesn't. That. That I hear the opposite too. Of like, oh, that's just. That sounds so constricting. And like, oh, it's. That sounds so controlling. And I don't know if I want that. And then you start to realize there is an underlying level of anxiety, whether you address it or not, when you still have a question mark in your head of thinking, okay, as I'm taking stuff and putting it in my cart and I'm going to check out, and I see that total. The feeling of, oh, I thought that was going to be restrictive. When I know, oh, this is how much I have to spend each week, it actually becomes such freedom where you actually enjoy and have a level of peace with it. So. So on. On both ends. Right. The level of anxiety of do we have enough? But then also people are saying, oh my God, I don't want to live on a budget because that just means I can't have any fun. And that feels so restrictive. Well, you don't realize on that end too, there's a level of anxiety because you don't. You don't know what's going on.

[Dave Ramsey]

You're creating anxiety with that immature. Yes. Look on life.

[Rachel Cruz]

That's right.

[Dave Ramsey]

Because it's immature to go, I can just spend like I'm in Congress. Yeah. And that's just a. That's a childish view. Because obviously we all know we can't do that. It's not. I mean, grownups know the money runs out somewhere. And so, you know, and you know, even like we had to go so far as we went to. We went hardcore more than we recommend today on the envelope system. Like, we had envelopes for everything, like envelope for groceries, an envelope for restaurants. And your mother would not buy herself clothing. Cause she's a classic Southern belle martyr. And she's like, well, I'll just be Scarlett O'Hara. I'll make something out of the drapes and the kids can have new clothes. And it's like, no, that's not necessary. We have the money to everything. So what would happen is we would have clothing budget and she would spend it all on the kids, wouldn't buy herself anything. So I had to finally separate in the budget. In the early days, Sharon's clothes was a separate category and she was not allowed to spend that on anything but Sharon's clothes. Amazing what that did to give her guilt free spending.

[Rachel Cruz]

Yes. It is such permission that. Okay, we're okay. We can do this.

[Dave Ramsey]

Not only permission, it was. It became like a command. You have to buy yourself something. I mean, it's not, you know, I mean, really. Because it's out. It just got weird. It got weird.

[Rachel Cruz]

Right, right, right, right.

[Dave Ramsey]

So the thing, you know, and so we. We had envelopes for everything. And the first time we had a babysitter at home with you and Denise. And we're going out to dinner. One of the rare times we got to do that as we're starting our climb out of being broke. And we got halfway to the stinking restaurant, 10 minutes away, and realize we did not have our restaurant envelope. Now we had the car repair envelope. And most people would just go on and use the car repair money and when you get back home, switch the money out.

[Rachel Cruz]

I probably would have done that.

[Dave Ramsey]

Yeah, I would. I would do that today probably. But we were so intent on. Something has to change. We have to stick to something for the first time in our lives. We cannot keep doing the same stupid crap and expect to be anything but broke. We turned around, went back home and got the food envelope. I specifically remember doing that.

[Rachel Cruz]

Impressive. Yeah.

[Dave Ramsey]

Blew the babysitter's mind because these people come back home 10 minutes after they left. Oh, God. You know, so. But. Or I guess her boyfriend probably ran out the back door. I don't know. Whatever. But you know, the. Right. But anyway, but I mean, so we got the. I'm kidding. I'm sure Angie wouldn't have done that, but you remember Angie. Yeah, but anyway, she was a great babysitter. But the. Anyway, the. Yeah. So this idea that I can, with my spouse write down what we're going to do and I have guilt free permission to spend on a category because our plan is accomplished and it includes this spending item.

[Rachel Cruz]

Yes. Yep.

[Dave Ramsey]

That is so freaking powerful, people. It changes everything. And John Maxwell used to say a budget is people telling their money what to do instead of wondering where it went. So download the Every Dollar app and start budgeting. It's free. You can do that in the App Store or Google Play. It's a very simple plan and it has all kinds of extra paycheck planning. You can plan out not only the month ahead of time, you can plan out each paycheck ahead of time.

[Rachel Cruz]

Yeah. The premium version is so worth it. You all. Because the trans. You connect it to your bank account so your transactions drop in. So you drag and drop them. So you know, some people still use the cash envelope system. But most people, this is like the 2024, 2025 way of doing version of it. Yeah.

[Dave Ramsey]

And you don't have to go back.

[Rachel Cruz]

Home, but you're sitting there and watching it and you're able to drag and drop these transactions to no per category. What's left? And to your point, all the other features the paycheck planning. Because some people, you know, if you are paycheck to paycheck cycle, it is so difficult to break that because you're using that paycheck to funds your life up to the 15th. And if too much is getting taken out at the beginning of the month, you're going to be bouncing checks more. I mean it just, it gets, it gets really complicated. So the paycheck planning helps even within that to get on a great cycle when it comes to your paychecks and to stay on top of it. It's so helpful.

[Dave Ramsey]

Guys, you got, you got to start doing this. It changes everything. You'll breathe different. Your shoulders are dropped. The tension will leave. Download the EveryDollar app. It's free in the app store or Google Play and get yourself started. Boys and girls, this is the Ramsey Show. You want to leave happy memories for your loved ones when you pass away. Not a mess. Your family will be grieving, so don't make them spend days trying to access your computer or sift through drawers full of junk. That's why you need a knockbox. Knockbox is a complete home organization system and estate planning tool that helps you organize all of your accounts, personal history, wills, estate planning documents and all other info in one place. Inside each kit are 15 categories covering everything from life insurance policies and funeral plans to your dog's vet and the code for your storage unit across town. And the best thing about your knockbox is the checklists that tell you everything to add to each folder so your loved ones won't have to guess where things are. So if you have a household, you need a knockbox and you can get organized in time for the holidays by visiting knockbox.com Ramsey that's n o K box. Rachel Cruz, Ramsey personality is my co host. If you didn't know, we have the Ramsey Network app. It is a free download and you can get the third segment, the third hour of this show every day only on the Ramsey Network app and many other things including you can email us and ask us questions. You can enter a subject and it will search among the calls on that subject and present them to you so you don't have to like filter through 22 days of stuff to find the answer you're looking for the Ramsey Network app. You can download it for free. There is no subscription upgrade. No salesman will call from the Ramsey Network app. We get our question from Corey. Dave, you recently took a call where the person had 35 credit cards. How do the banks even allow someone to get that many cards?

[Rachel Cruz]

Actually a good question, Corey.

[Dave Ramsey]

Corey, that's sweet that you are naive enough to think that the banks even think that's sweet that you would think common sense would enter into this transaction. That's so sweet, Corey. No, it doesn't. And you know, this is the same kind of mentality, Corey, that you've got that people say, well, I must be able to handle the payment or they wouldn't have given it to me. No, they'll give it to you the same. Yeah, whatever the payment is, they'll approve you for the loan.

[Rachel Cruz]

Way beyond 18 year old, $200,000 in loans for college.

[Dave Ramsey]

Sure, sure.

[Rachel Cruz]

Right, yeah, just, they just, just like hand it to you.

[Dave Ramsey]

So Corey, the most aggressively. Here's an interesting fact. This is. Let's just take it even a step back further. We now at this moment in 2024 in America, the United States, live in the most marketed to, sold to culture in the history of the world, in the history of the human race. You will receive more marketing impressions on your ears and eyes and brain in this coming calendar year than any set of humans ever has in history. That's pretty interesting when you think about it. And when you are sold that much stuff, people buy that much stuff. And among the most marketed to group of people in the history of the human race. The most aggressively marketed product in the most aggressively marketed time in history is debt. Debt is a product. They sell it. They sell home equity loans, they sell student loans, they sell car loans, they sell private loans, they sell title loans, they sell any kind of home loans, any kind of loan you can dream up. Put the word, put a word in front of the word loan and it happens. Dog loans, cat loans, there are loans for everything. I was trying to buy a T shirt for God's sakes and they offered me payments on it with Klarna the other day. I'm like, it's a T shirt. Why would you. Yeah, three easy payments of $1.26. I mean, come on, you know, it's like what?

[Rachel Cruz]

Not a five dollar T shirt.

[Dave Ramsey]

I'm kidding. But I don't remember that.

[Rachel Cruz]

No, I know, but probably wasn't the.

[Dave Ramsey]

Numbers 10 easy payments.

[Rachel Cruz]

It's at the end of every transaction.

[Dave Ramsey]

20 easy payments of a $t shirt.

[Rachel Cruz]

No, I got you.

[Dave Ramsey]

Whatever it is. And they're always easy payments. No one says hard payments. Right. And yet when you make them, they're always hard. They're not easy, so. And among the most aggressively marketed debt products. The most aggressively marketed debt product. Debt being the most aggressively marketed product in the most aggressively marketed to group of people in the history of the human race is credit cards. Corey. American Distress. Visa, Master Card. They're your new Master. And Discover Bondage together. Spin those four names. Spin more. American Express. I said that one. Yeah. American Distress. They. Together, they will spend $1 billion on marketing. It's more than beer. It's more than Chevy pickup trucks going through mud puddles. More than all your car advertising put together. More than any other category of advertising. What's in your wallet? Says the failed actor. The actor who can't get a part now, what's in your wallet?

[Rachel Cruz]

Or the great actress. Because they're paying billions or millions of dollars to her too. So. Yeah, because they have it.

[Dave Ramsey]

Gotta admit, I'm a Jennifer fan.

[Rachel Cruz]

There was a. That's what I was thinking of. Jennifer Gardner. Yeah, she's actually great.

[Dave Ramsey]

But Maverick. Her dad would not be proud.

[Rachel Cruz]

I know. And I'm trying to look up because it was sent to me by multiple people. Now I can't find it.

[Dave Ramsey]

So, anyway, the credit card is the most aggressively marketed product out there. And so in the midst of that, they are issuing credit cards en masse to people who can't pay them, don't need them. Including dead people. Dogs. We used to collect bizarre credit card stories.

[Rachel Cruz]

I remember that.

[Dave Ramsey]

And I had a guy send me one from Virginia. He, as a joke, which was fraudulent and he shouldn't have done this, but as a joke, he applied for a credit card in the name of Buck Naked.

[Rachel Cruz]

Okay.

[Dave Ramsey]

They issued the card to Buck. Buck got him a card another guy sent me from New Orleans, a credit card, an actual card. He sent me the card and a letter. It was issued to Frou Frou, who was his poodle, who had died. And that was unsolicited. They picked it up off the AKC registration and meant to send it to the owner of the dog. Instead issued the card en masse to the dogs. Literally, it's gone to the dogs. And so, I mean, this is the credit card world. So please, God, don't think you're special if somebody gave you a credit card. I mean, when I was in college, I thought, well, if they Give me. If I can get an American Express, then by God, I'm successful. And if I get a gold piece of plastic versus a silver piece of plastic, then I'm really someone because of the color of my plastic.

[Rachel Cruz]

And you get to pay more fees to get those cards.

[Dave Ramsey]

Color of my plastic dictates the quality of my personal identity.

[Rachel Cruz]

Yep.

[Dave Ramsey]

So, Corey, that's what you're dealing with. Yeah, yeah, we get, we, we've had people with 200 credit cards. There are people that are, that believe that credit cards are excellent and they have their own YouTube channel and all this stuff on how you can live off of the points and how you can be the card man or whatever and all this stuff.

[Rachel Cruz]

Right? Yeah.

[Dave Ramsey]

So it's, it's, it's a thing because it's so prevalent that any moron can get more credit cards than they can pay. So that's, that's how. Corey, because the, you know, you're making the sweet and naive assumption that the bank actually cares about you and would look at you and say, you can't afford this, so we're not going to do harm to you. No, they don't. That none of that is true. They will do harm to you in a heartbeat if they get the opportunity.

[Rachel Cruz]

And just to remember that they're. They're here to make money off of you and they know how to do it. Like, that's their job. That's their job. And there was a recent clip, it went crazy.

[Dave Ramsey]

But the one you were just trying to find.

[Rachel Cruz]

Yes, and I found it. The president of. Or whoever it was, of MasterCard and Visa. It was the two. They have 80% of the market share and they're in front of Congress because of antitrust. Yeah, well, and they can't, they won't lower fees for small businesses. Like they give deals to big corporations like Walmart and, and they have to verbalize and say what they're making. Their profit margin. It makes you sick. It makes you realize, literally off the backs of Americans, this is what they're making. Like it is. They make. And we know, we, I know, we know that they make billions and billions and billions. But as you sit there and watch these two people, you're like, oh, my God. And they're not even, you know, from any level of integrity trying to help small businesses, even though we're against credit cards. But like, even that, right? I mean, everything is about making money. It's all they're in it for. And so they know how to do it really well and they market it to you and bring you into this cycle and this mindset of it that is very. It's crazy.

[Dave Ramsey]

So just remember, if you're issued a new credit card, you're no better than Frou Fru Rebuck.

[Rachel Cruz]

Moral of the story, look up the Congress.

[Dave Ramsey]

Clip the dead poodle or the naked guy that doesn't exist. There you go. One of the two. I mean, you're no better than either. This is the Ramsey Show. Hey, I'm excited to talk about a new sponsor, Burna. You all probably know I'm a gun guy, but I'm big on safety, so I'm also a Burna guy. Burna is the ungun, a less lethal option that protects you in more ways than one. A Burna is effective self defense when you need it. It also helps protect your assets from lawsuits if you have no choice but to use force. Because a Burna pistol immobilizes attackers without fatal harm. I have several Burna pistols and I love them. In fact, I had a Burna before they started advertising with us. They're easy to use with no recoil and no noise reduction needed. They're legal in all 50 states with no permits required. And because they're not firearms, they can be shipped right to your door. And you can train with a Burna right in your backyard. Plus, our listeners can get the Ramsey burna bundle for 10% off, which includes a Burna pistol, CO2 cartridges and ammo. And other Burna products like safety alarms, defense sprays and body armor are also 10% off. For Ramsey fans, see why Burna has more than 15,000 five star reviews. Just go to Burna.com Dave to learn more. That's B Y R N A dot com Dave Rachel Cruz Ramsey personality number one bestselling author. My daughter is my co host today. Open phones at 888 825. 5225. Jake in Savannah, Georgia. Hi Jake. How are you? Good.

[Jake]

How about yourself?

[Dave Ramsey]

Better than I deserve. What's up?

[Jake]

I was just calling regarding how I can stay focused on getting out of debt and not incurring more.

[Rachel Cruz]

Okay. How much debt do you guys have or do you have?

[Jake]

I have about 20,000 and my fiance has about 20,000.

[Rachel Cruz]

Okay.

[Dave Ramsey]

Why are you getting out of debt?

[Jake]

I just want a better life and we have a kid on the way and I'm tired of living paycheck to paycheck.

[Dave Ramsey]

Okay. So the thing that we find is that the bigger and more pure the reason for getting out of debt, the why, why I'm Getting out of debt, the more intense and sacrificial and disciplined you will be. It sounds like you have a really good why. And if you came to truly believe deep down in your soul that the only way you're going to become wealthy and provide an incredible life experience for your brand new bride and baby is to get out of debt, then the discipline starts to become easy. It's almost as if I said if you don't pay off $20,000 in two years, your child won't, will not be alive. If you said that you would find 20,000 bucks. Now I'm not, obviously that's crazy. That's not going to happen. Right. But I'm saying if you had to buy a thing to keep your child alive and you needed $20,000 to buy that thing, and you only were allowed to pay cash, you'd find $20,000. Agreed?

[Jake]

Yes, sir.

[Dave Ramsey]

Because your why would be so huge, your reason discipline wouldn't even come. I'm having trouble being disciplined to save the life of my child. No, that would not be something that would come out of your mouth. And so the more deeply you understand and believe that by getting this $40,000 paid off between the and the two of you getting married and creating a double income and creating a situation where you dive in and stay out of debt and build wealth, the more you believe that that is the path for your family to have an incredible next 50 years, the more disciplined you'll be. But if you just kind of go, well, being kind of nice, and I think we'd probably be out be better off, but it'd be kind of nice. Well, that's like a three on a scale of one to ten. And I'm talking about a ten.

[Caller]

Mm.

[Dave Ramsey]

You see the difference?

[Jake]

Yeah, I do.

[Rachel Cruz]

Do you feel that, Jake? Where do you feel like you are on the scale?

[Jake]

I, I feel like I'm definitely on the high end of the scale. Probably a 7 or an 8.

[Rachel Cruz]

How about your fiance?

[Jake]

Her situation is a little different. She doesn't see eye to eye with me on the getting out of debt thing.

[Rachel Cruz]

Okay. Have you guys talked about that?

[Jake]

We have. And I've kind of tried to explain to her like, hey, us getting out of debt means less payments. It means more money to take towards our kid and ourselves and our life together. And she her side of the coin and she's like, well, she has the mentality of, well, you can't have the nice car unless you have a payment and you can't have the nice house unless you have a Payment.

[Dave Ramsey]

You ought to see my house in my car.

[Jake]

Yeah.

[Dave Ramsey]

It's just better than what she dreamed of. And no payments.

[Carol]

Yeah.

[Jake]

And I tried to explain that to her and I'm, I'm fighting to fix my own debt as much as I can. And we do basically everything together.

[Dave Ramsey]

Yeah. You're going to have trouble, Jake. You're going to have trouble being disciplined.

[Rachel Cruz]

Yeah.

[Dave Ramsey]

As long as the other side of your brain called your wife is tearing you down. So the two of you getting aligned on this is your all's biggest issue. You cannot singularly carry this household on your back to wealth while she simultaneously isn't in agreement. You guys have got to get on the same page. It's a problem in your marriage going forward.

[Rachel Cruz]

It's one of the top. It's always in the top five lists, sometimes the top three, sometimes it's number one, depending on which list you look at, of reasons for fights and disagreement in marriage. It's a, it's a really big topic. So I would, and I would talk to her too about, you know, the why behind it for you and even on a deeper emotional level too, Jake. Not just, oh, yeah, so we don't have payments and we can build wealth, but there's a level of a value system at which you look at life that needs to be so aligned together to enjoy your marriage and your life together.

[Dave Ramsey]

Crystal's in Tampa. Hi, Crystal. Welcome to the Ramsey Show.

[Caller]

Hey, Dave and Rachel, thank you so much for taking my call.

[Dave Ramsey]

Sure. What's up?

[Caller]

Okay, so I've been listening to you guys for about six weeks, really diving in. I actually look forward to the show every day, like at 2:00.

[Dave Ramsey]

So thank you.

[Caller]

I've been talking to my husband about all the things and kind of keeping him in the loop. I'm the main one that does the finances and it's been that way for years. But we're on baby step two. And so I have, you know, our snowball list, we don't have like a lot of line items. It's just a big amount, unfortunately in total. But obviously listening to your all's advice and I know it's going to take some time and a lot of hard work, but my main question is I have not taken into account the $5,000 worth of medical bills that we have sadly racked up. And so with my Lyft, my snowball list, how do I incorporate or incorporate the payments for the medical bills with like my loans and my credit card that we are currently working on, or.

[Dave Ramsey]

Do I keep how did you prioritize your snowball list? You listed it how smallest to largest. So we're smallest to largest, what balance we have or payment balance.

[Caller]

Correct, sorry.

[Dave Ramsey]

So you have balances on the medical bills, right?

[Caller]

I do have balances on them, yes.

[Dave Ramsey]

Just redo your list.

[Caller]

Okay.

So that's, that's what I was curious on. Should I just.

[Dave Ramsey]

Yep.

[Caller]

Because there's multiple lists of. Or multiple different bills of medical. Should I just add them into that list? So then.

[Dave Ramsey]

Yep.

[Caller]

It'd be one single list. Okay.

[Dave Ramsey]

No. And you know, and the problem. Bad thing about the medical bills and the good thing about the medical bills, some of them are tiny. Like you got a $78 from diagnostic just because you drove near a hospital.

[Caller]

Yes.

[Dave Ramsey]

Right. You know what I'm talking about. Yeah. We don't know what the flip that is, but they sent us a $78 bill for it. And it's like you got all these little mosquitoes flying around. They're not even big. Bills are just bothersome. And so that's the bad news. The good news is you're going to plow through like one through number 10 really fast and you're going to get this sense of I just did something.

[Carol]

Feels good.

[Caller]

It does feel good. I've paid off most of the little ones. It's of the medical ones that. Yeah, yeah, most of the little ones. So it's the bigger ones that.

[Dave Ramsey]

What's your smallest medical bill right now?

[Caller]

Probably $190 right now. Still smallest one.

[Dave Ramsey]

Still very small.

[Caller]

Yeah, it's still small for sure.

[Rachel Cruz]

How much total, Crystal, is your debt, Snowball? I'm just curious what your journey is, how much you're paying off.

[Caller]

So right now without the medical bills, because currently it's a separate list. I've got about 80,000, so.

[Dave Ramsey]

85,000.

[Caller]

Exactly.

[Dave Ramsey]

And your household income is what?

[Caller]

So I think we make really good money. We? Bout 230 a year.

[Dave Ramsey]

Oh great. You're gonna be done in a year.

[Caller]

I know. We've just made a lot of. What is it you say? Mistakes with zeros on the end. We've made a lot of those.

[Dave Ramsey]

Yeah. You paid a lot of stupid tax. Yeah, but I mean if you live, if you live on a hundred grand, you're debt free in a year, right?

[Caller]

Yeah, that's the goal.

[Dave Ramsey]

That's pretty cool.

[Caller]

And my husband is all on board.

[Dave Ramsey]

Good, good. Well, yeah, the more he's involved, the more helpful he is. I don't want him writing checks because you're the nerd. You're the good one to write the checks. But I do want him emotionally standing there, not just saying, honey, you're doing a good job. I want him saying, honey, we got this.

[Caller]

He is. He is. Absolutely. Yes, I agree. Thank you. I appreciate it.

[Dave Ramsey]

That's good. I'm proud of you. Way to go, Crystal.

[Caller]

Oh, thank you. Thank you very much.

[Rachel Cruz]

Very excited.

[Dave Ramsey]

That's very well done. Man, she gonna knock this out so fast.

[Rachel Cruz]

Yes.

[Dave Ramsey]

It's so fun when you have been going along and you don't know what to do and you suddenly discover fire.

[Rachel Cruz]

And you do it and you're like, oh, you'll be done in a year.

[Dave Ramsey]

Look at that. That's fire. I can cook stuff with that. Yeah, it's knowledge is powerful. It really, really is very cool. That puts the sour the Ramsey show in the books.

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[Dave Ramsey]

Headquarters of Ramsey Solutions, it's the Ramsey show where we help people build wealth, do work that they love, and create actual amazing relationships. I'm Dave Ramsey, your host, Rachel Cruz Ramsey, personality number one best selling author is my co host. You jump in, we'll talk about your life and your money. The phone number is, call-8825-5225. Sarah is in Boston. Hi, Sarah, how are you?

[Sarah]

Good. It's so nice to talk to you.

[Dave Ramsey]

Dave and Rachel, good to talk with you. How can we help?

[Sarah]

Yeah, my dream is to achieve financial freedom and continue to build wealth. But I feel like my spending habits are getting in the way of that. A little bit of background. I'm 25. I'm making over 150,000 a year.

[Dave Ramsey]

Wow. Good for you.

[Sarah]

Yeah, I have no debt. I'm putting myself through school, but I find myself spending unnecessarily on things I don't need. And I'm just wondering if I can get some advice on how to rein in my spending and start building wealth and achieve my financial freedom goal that I'm shooting for.

[Dave Ramsey]

What do you do and what are you studying?

[Sarah]

I am studying engineering and I am in pretty much an entry level engineering position and I love what I do. I'm able to work from home and I have a lot of great benefits. But, you know, I feel like there's more that can be done.

[Rachel Cruz]

Okay, so what are you wanting? Yeah, when you say there's more because, I mean, you're putting yourself through school debt free. Correct. You have no other debt. So is it investing you're looking at? Is it just your spending habits that you feel like you're making a lot, but there's not a lot to show at the end of the month? What's, what's your biggest pain point?

[Sarah]

Yeah, I feel like I have, I don't have boundaries when it comes to spending. I feel like I could be using my money for better things like investing for, for the long term, but I find myself spending a lot of time online shopping or going out, and I don't have a lot at the end of each month to, to put in my investment accounts like I'd like to.

[Rachel Cruz]

Okay. Are you on a specific budget, like a pretty detailed budget?

[Sarah]

Not really. I just kind of spend as you want.

[Rachel Cruz]

I mean, honestly, for you, Sarah, that's. That and an investing goal are the two things that will, I think, completely change your life. I mean, if you have it, if you have a budget because you're doing well financially, right. You're not going deep into debt, you're not trying to, you know, pay off debt. You really are able to use the cash that is coming in from your income and you're going to be able to spend some. I mean, you're at this point that you will be able to enjoy some of it, but you're not able to really enjoy it because you're questioning every purchase. And so being able to put a line item and deciding a dollar amount ahead of time to say, okay, yeah, I can go shopping, but I'm just going to put this amount and that automatically is going to give you a guardrail to enjoy it. And still, you know, because you're at the point again, I will reiterate, you don't have debt, you have a great income, so you can enjoy part of it, but you want to do it with some level of control and purpose. And then knowing on the other end that you do have an investment goal. And I would tell you 15 of your income should be going into retirement. And knowing you're doing that as well is going to give you a lot of peace and freedom. But that, that monthly budget, I think is going to be a really great tool for you to help. Because I'm the same way. I'm a spender. I enjoy spending, shopping, all things. And I do it now with such more peace knowing, okay, yeah, there's a specific dollar amount per month that I have the ability to spend and I'm going to cut it off after that. And so that, that takes a level of discipline, but it also allows you to enjoy life and enjoy your money so much more.

[Dave Ramsey]

So as an engineer, you're learning or have learned to project plan. What Covey used to say, beginning with the end in mind and with your money, what's happening is you're getting to the end with no plan, and it's not satisfying because it didn't go where you wanted it to go. And so it'd be like building a bridge and making it up as you go. Well, you don't do that. We lay out a plan, we do drawings, we run the math to make sure the structure will hold, and then we build the bridge. We don't just kind of start moving dirt and hope it all works out. And that's kind of what you're doing with your money. So let me ask you this, Let me see if I'm getting this picture correct. Okay, you're 25, you're single, you're in Boston, and you work from home and you go to school, correct? Yes, the school online.

[Caller]

Yes.

[Dave Ramsey]

So your work is online and your school is online. And you said, I spend money shopping online and I go out, which would make you, thank God, a normal human being, because otherwise you're trapped at home online. And instead you actually go out for human Connection. Good. Okay, so you should allocate some money.

[Sarah]

Screen for like 12 hours a day.

[Dave Ramsey]

Yeah, you should, you should allocate some money for what's called a social life. Yes. Because otherwise your brain is going to melt. Okay, that's good. Humans are. It's not good that man or woman be alone. We should be out seeing other humans. Okay, so I want you to do that. Now. The problem is you need a. I'm going to recommend a non Internet hobby to be done on downtime, an analog downtime because your downtime now is Instagram, Facebook and Amazon Prime. And there is a direct. There's research out there that says the more time you spend on social media, the more money you spend. Because social media is the world's worst. Jones is next door. You see everyone else's highlight reel and they've splash suggested products. Mix it into your Instagram feedback, mix it into your Facebook page and whatever else you're consuming. TikTok is even worse. And so instead of when I've got 10 minutes, I'm going to doom scroll. Your spending is always going to be there. If you do that, just unplug from do a social media fast and say I'm only going to do social media 30 minutes a day between 5pm and 5:30. That's all. Or 5 and 5:15 would be okay with me. All right, that's all. And your spending will go down and you cannot go on Amazon ever again unless it is to specifically purchase a certain thing that you thought of as a part of your budget. You cannot go on there and scroll because Amazon is the world's best marketer. They will sell you crap. You following me? Is this, does this sound right?

[Sarah]

No, this definitely sounds right. I definitely need a hobby outside of the screens.

[Dave Ramsey]

Yeah, you know, I, because it's, it had to be with the way you're living your life because your life is in front of the screen and you go, okay, I got 10 minutes. I'm going to take a little break. I'm going to. I'm going to have some brain junk food and I'm going to doom scroll for a minute just because my brain's hurting from class. Right. That would be, that's what I would do. And I'm 64. I'm not susceptible to it like you 25 year olds because you grew up with this crap. I didn't. But I still, I have to watch myself if I get bored. I end up buying something if I'm not careful. That sound familiar?

[Sarah]

Yeah, that's definitely Me.

[Dave Ramsey]

Okay.

[Sarah]

And I am putting money away for retirement.

[Dave Ramsey]

I'm just wondering, but you start with.

[Sarah]

I want you to Amazon. Where should I put it?

[Dave Ramsey]

Yeah. Give every dollar an assignment before the month begins. On your budget. On your every dollar budget. Put your every dollar budget down and you cannot go to Amazon unless it's to buy something you budgeted for.

[Rachel Cruz]

And the other money to save. She asked besides just retirement, you know, open up a high yield savings and have a savings goal to say, yeah, I need a fully funded emergency fund of six months and beyond that, have things you're saving up for to at least have the motivation to put that.

[Dave Ramsey]

Money away and do spend some money on social engagement. You need it. It's good for you. This is the Ramsey Show. Hey you guys, I'm not a fan of the big banks and you probably already know which ones I mean, but I do like credit unions because they're nonprofit organizations that focus on they're members. And I'm proud to endorse Fair Winds Credit Union because they share the Ramsey mission of helping people get out of debt and live generously. In fact, they design products to help keep you from going into debt in the first place. Fair Winds has been in business for over 75 years and they serve hundreds of thousands of members worldwide. You can feel secure because your deposits are federally insured by the NCUA up to $250,000. It's easy to join and Fair Winds partners with more than 5,000 credit union locations around the country so you can bank in person wherever you live. But if you prefer the online experience, you can log on to Fairwinds and do anything you could do at a physical location. So go to Fairwinds.org Ramsey to learn more. And while you're there, look at the combined checking and savings account bundle they created just for Ramsey fans to help you take control of your finances. That's Fair Winds. F A I R W I n d s.org/ramsey. It's cyber Monday week and if you're looking for Christmas gifts that actually make a difference, we've got them. Get best selling books like Breaking Free from Broke, Baby Step Millionaires and more for just $12 or audiobooks for just eight bucks. Now's your chance to give something that'll help your friends and family build wealth, transform their relationships and find work they love. Visit Ramsaysolutions.com store today. Ramsaysolutions.com store Rachel Cruz, Ramsey personality, is my co host today. The Ramsey Show. Question of the day is brought to you by why Refi we trust. Why Refi? Because they help people who have defaulted private student loans. If you have a defaulted private student loan, they'll refinance it with a low fixed interest rate. Couldn't get anywhere else. Chris had a student loan and he cut his payment by over 40% with a Y refi. Try it out. Why refi.com Ramsey. That's the letter Y, R, E, F, Y.com/. Ramsey might not be in all states.

[Rachel Cruz]

Today's question comes from Lucy in Nebraska. My husband's daughter and son in law wants us to get a mortgage on a house for them. Our house is paid for and we have no bills but we're on a fixed, fixed income. They want to keep their house they have now and rent it out to pay the mortgage that they want us to get. He's a cop and she's a firefighter. We cannot afford a mortgage. But my husband is considering it and I'm not in agreement with this plan. What do I do, man? Lucy. Yeah, I mean I would agree with you. I wouldn't be in agreement with this plan either. And with you and your husband. Yeah, I mean I think continuing to sit down and understand and unpack why you're not in agreement. And it's not pointing fingers at him saying, well you, you, you, this is talking about you and what. And your desires, your fears which you are worried about in this. And just the simple math of even though, yeah, you said you guys, your house is paid for and you have no bills but you're on a fixed income. I don't know if you're working towards retirement or what that looks like, but realistically running these numbers out even for a decade, right the next 10 years and what the reality is for your situation because I do think some parents, the, the heartstrings get tugged so deeply that sometimes you lose the reality of your situation. And that's maybe what your husband's doing since it's his daughter. But I would be looking at not just the emotional side but also the number side with him a lot and keep that conversation going.

[Dave Ramsey]

Sometimes it helps to reframe the proposal and use words that explain what this actually is. Honey, your daughter and son in law who have two good jobs want us to borrow money so they can have a rental property.

[Rachel Cruz]

That's exactly what it is.

[Dave Ramsey]

When you say it that way it sounds dumber than crap. Because it is dumber than crap. That's why it sounds that way instead of like, oh, we're helping them get a home. No, you're not. They have a home. They want a rental property. And they read this and some stupid thing on the Internet to go to their retired parents to get a mortgage. Why can't they get a mortgage? They both have a job. Oh, wait. They haven't been paying their bills on time and their credit is bad. Oh, hello. Yeah, this is. This just screams stupidity really loud, like with a capital S T U p. I d say the cheer with me, everyone. Give me an S. Give me a T. Seriously. Oh, no. Don't do this. Absolutely. And here's what happens at our house. We start with trying to reason and talk things through. And when one of us just absolutely is not going to do it, the heat just gets turned up. And so our rule is that if we're both not on board, we can't do it. And you're not on board and you're not going to get on board. Please don't get on board. Please get through the fog of this. Yeah.

[Rachel Cruz]

And it's not.

[Dave Ramsey]

What do his kids need? They sell the house and they get their own mortgage.

[Rachel Cruz]

And not only is it not good for you guys. Lucy. But this is a disaster. Waiting for them like this could set them up to fail in a major way, too. So it's. It's on both ends. Not great. Even though he feels like he's helping, it's actually putting them in a pretty dire situation. Having to float a mortgage through a rental property. Not good. Not smart.

[Dave Ramsey]

Yeah. You're buying them a rental property? No, absolutely not. Heard this on Tick Tock. Deb is in Oklahoma City. Hi, Deb. How are you?

[Deb]

Hi, guys. So great to talk to you.

[Dave Ramsey]

You too. What's up?

[Deb]

So my husband and I are on baby step seven. We have just over a million dollars in our net worth. And we have run into a scenario where we think that we have found our dream house and it would have us go back into debt for it. We would take out a small mortgage to basically, we'd sell our house for roughly 450 and then turn around and have a mortgage again for about 250,000.

[Dave Ramsey]

You don't have the 250?

[Deb]

No, not all liquid.

[Dave Ramsey]

What's liquid mean? All in retirement.

[Deb]

Not liquid.

[Dave Ramsey]

Not all. No.

[Deb]

I mean, yeah, we have about half a million in retirement. We have 45 cash, and we have a $15,000 emergency fund and then a little bit other money in some investments. I believe that's probably about 50 or 60.

[Dave Ramsey]

And you don't own any other property?

[Deb]

No.

[Rachel Cruz]

How much you guys make a year?

[Deb]

Deb, 200 before, and not including his bonus that is kind of fluctuates every year. So 200 is, like, for sure.

[Rachel Cruz]

Mm.

[Dave Ramsey]

I mean, you can do that. It's not going to bankrupt you.

[Caller]

Yeah.

[Dave Ramsey]

There's no possible way you could get me to go back into debt after I finally got out. That doesn't sound like a dream. That sounds like a nightmare to me. But, I mean, it's just a stupid house. There's no way I'm going into debt for it. But, I mean, if you want to do that, you can do that.

[Rachel Cruz]

But. Yeah, in a reasonable time, you know, because a mortgage is the one type of debt we do talk about.

[Dave Ramsey]

Yeah, but you're out.

[Rachel Cruz]

Yeah. But if it's a small amount and you liquidate the 50 from the retirement, the other 45, you know, that's half of it. And if you guys commit to say we're going to pay it off in 24 months or whatever, you know what I mean? Like, if there's a.

[Dave Ramsey]

You can do that. Just save up the money and buy something.

[Deb]

That's what he thought you were going to say.

[Dave Ramsey]

Well, I mean, you never heard me call up and tell somebody in baby step seven to go back in debt.

[Carol]

Yeah.

[Dave Ramsey]

No. I mean, no.

[Deb]

And I think probably we've. We, deep down, we know that. That we probably would have buyer's remorse. Yeah, I threw up a little in.

[Dave Ramsey]

My mouth and it's not even my house. It's not even my house. Oh, gross. It's just gross. No, I mean, if you want to do it, honey, I'm not being mad at you. We'll still be friends. But no, we do not tell people to go into debt in baby step seven to buy a luxury upgrade. And if you want to do that, if you want to do that, you're not going to go bankrupt. It's not a sin. You're not going to hell. We'll still be friends, and you'll just be my friend with a mortgage. And, you know, you know, we have.

[Rachel Cruz]

Known people that this is like, not for a car or anything, but we don't.

[Dave Ramsey]

We don't tell people to do it for real estate in baby step seven, I just don't. I mean, because the goal is to get out so that you don't have to go back and, and voluntarily. Going back to jail after I've been set free. I don't want to go. I'm. I. I'm free. I don't. I like my freedom. I don't. I love my interest rate. On my mortgage. Zero. Um, you know, I. So, Deb, I mean, I'm making, I'm poking fun, but the truth is the borrower is slave to the lender. The truth is the fastest way to wealth is to avoid debt, period. The truth is there's more peace associated with that. The truth is you guys have worked so hard to become debt free that you will have some buyer's remorse. You will feel this regret, this taste on the back of your tongue that when you go, oh, man, I just feel like, I feel like I did something wrong because you did. So, I mean, it's not, you know, that that's what it's going to feel like. But is it bankruptible? No. Is it going to keep you from building wealth completely? No. It just slows down everything. And there's the emotional and psychological.

[Rachel Cruz]

That's the, I think that's the biggest.

[Dave Ramsey]

Fell off the wagon.

[Rachel Cruz]

It's less about the math and Deb situation. It is because I'm like reasonably all the things. But that's what we talk about is that personal finance? It is, it is more than just the math. It is that element of like, oh, we're going back in.

[Dave Ramsey]

You can buy a house just like that one in 36 months and pay cash for it. That's what I would do. This is the Ramsey Show. Mortgage rates have dropped. So if you're thinking about buying a home in the next year, contact your local Churchill mortgage team right now. If you wait, more people will be in the market, competing for the same homes and potentially driving up prices. Churchill will help you do the math to be sure your budget is correct, making your home a blessing and helping you build lasting wealth. Learn [e-mail] Churchillmortgage.com this is a paid advertisement in MLS.

[Rachel Cruz]

Id 1591nmlsconsumeraccess.org Equal Housing Lender, 1749 Mallory Lane, Suite 100, Brentwood, Tennessee, 37027.

[George Camel]

Hey, George Camel here. So you're thinking about buying or selling your home? It's exciting, but there's a lot to think about and all those decisions can feel overwhelming. Well, here's the good news. You don't have to tackle the process alone. Ramsey's real estate home base is the place to find all of your free tools and resources for help to get prepared to buy or sell your home with confidence. You'll find calculators, start to finish guides, a podcast, and even an in depth video course hosted by yours truly. What's not to love? So if you're ready to take the next steps toward your home goals, go to ramsaysolutions.com realestate. That's ramseysolutions.com real estate.

[Dave Ramsey]

Rachel Cruz, Ramsey personality, is my co host today. Open phones a triple 882-55-5225. Jacqueline is in Minneapolis. Hi, Jacqueline. Welcome to the Ramsey Show.

[Caller]

Hello. Thank you.

[Dave Ramsey]

Hey, what's up?

[Caller]

So I just have a question on. I'm not familiar with the baby steps. First of all, we have mounting credit card debt and a mortgage and one loan on a car. And I do have some retirement para that could be cashed in, but that sounds like a terrible idea. And I just want help and guidance. Knowing what is the not easiest because I know this isn't going to be easy. But the most efficient way to pay off this credit card debt.

[Rachel Cruz]

Yeah, it's a great question, Jacqueline. How much. How much debt is it? Total.

[Caller]

Credit card? I would guess 55 to 65,000.

[Rachel Cruz]

Okay. Is that over multiple cards?

[Caller]

Correct.

[Rachel Cruz]

How many would you say?

[Caller]

Three cards.

[Rachel Cruz]

Three cards. Okay. What other debt is there?

[Dave Ramsey]

The car. How much is it?

[Caller]

Car is 26,000 on my. My husband's. Mine is paid off.

[Dave Ramsey]

Mm. What's your household income?

[Caller]

My husband retired last year. He. I would say 120.

[Dave Ramsey]

Currently it is 120, correct. Okay, good, Good. Okay. So what'd you spend the credit card money on, do you think?

[Caller]

My son has congenital chronic tumors, and we had to pay for those, and so we had to put the credit card debt on things for living expenses just because it got too much so that it's not like frivolous spending or anything like that. But it was, you know, things we needed.

[Dave Ramsey]

How old is he?

[Caller]

My husband or my son or my husband.

[Dave Ramsey]

Your son?

[Caller]

8.

[Dave Ramsey]

How's he doing now?

[Caller]

It ebbs and flows. He just, he has a lot of surgeries in the state I live in Blue Cross Blue Shield and the children's hospital couldn't come to an agreement and. Or who got paid what. And so my. My son was in hospital and we were on the hook for the bill while he was in the hospital.

[Dave Ramsey]

Have you gotten that straightened out?

[Caller]

We're working with the attorney general right now on it.

[Dave Ramsey]

Good. So you've escalated this. I'm proud of you. I'm so sorry. You guys have been through this. There's nothing scarier than dealing with a child with medical stuff, man. That's a big deal. So Basically, you had 50 to 60 thousand dollars of medical bills with your son that you paid for, and then Use the credit cards to buy the things you would have used that money for.

[Caller]

Correct.

[Dave Ramsey]

Okay. All right. And. But the prognosis going forward on your son's situation is that hopefully insurance will be picking up whatever he has to deal with going forward. Right?

[Caller]

Correct.

[Dave Ramsey]

Okay. So we've stopped.

[Caller]

When my husband.

[Dave Ramsey]

We've stopped the problem in terms of the. This caused the credit cards.

[Caller]

Yes.

[Rachel Cruz]

How old, how old your husband, Jacqueline? Because you said he's retired.

[Caller]

Yes, he's. He's 56. And so when he retired, I had to pick up the family health insurance, so I advised him to get a job with my company, because if it's a dual spouse, if both spouses work for the company that I work for, the insurance is free. And so that saved us about $1,400 a month. Oh, wow. But obviously he doesn't. He lives in law enforcement, so obviously he doesn't really want to be working, but such is life. So I'm happy that he was willing to go back to work.

[Dave Ramsey]

Well, if you're driving a $26,000 car you can't afford, it's kind of one of the things you have to do.

[Caller]

Right, so exactly.

[Dave Ramsey]

Yeah. That's good. All right, so the answer to your question is how do we efficiently get through this? And the reason we're asking all these questions is we're trying to figure out if you know, where the spending came from so that it stopped. Because you're gonna have to reverse. You not only have to stop the trend, but you have to reverse it now. So in other words, now we gotta find 80,000 bucks to pay off a car and some credit cards, and we make 120. Right. And so if I take 80,000 bucks and I say I'm going to do 40 a year out of 120, that means I got to live on 80, minus taxes. Right. So you need to be paying off three to $4,000 a month in debt, and you'll be debt free in two years. Now, how do we do that? Well, you're going to sacrifice some other things. There's no going out to eat. There's no vacations. And we're going to take lifestyle to ashes. Nothing. You get nothing. You got to be on beans and rice, rice and beans. And both of you got to work every hour. You can work and still take care of your baby and get. And get this knocked out as fast as possible. And that sounds like three to $4,000 a month towards this, which gets it done in two years and would trim.

[Rachel Cruz]

Six months out of it, too, Jacqueline. As if you guys sold the car.

[Dave Ramsey]

Yep.

[Rachel Cruz]

And you got a crappy car for a season.

[Caller]

You know, I. I have the opportunity to get a different job. I went back to school two years ago, and I got a paralegal degree, and I want to use that. And so I do have the opportunity in the next four months or so to more than double my income.

[Dave Ramsey]

Great.

[Caller]

Wow. Yeah. So, I mean, that's excellent. You know, it comes with the sacrifices of, you know, family time and whatnot. So if I do get that job, it would make most sense to me to live on my current. On our current income and put the extra money, you know, the difference in the income.

[Dave Ramsey]

I would live below your current income.

[Caller]

Okay, so live below the current income.

[Dave Ramsey]

Live on nothing. The faster you pay this off, the faster it goes away, the faster you get your life back.

[Rachel Cruz]

And, Jacqueline, do you want to be a paralegal long term? Like, do you want to do this for the next ten? Okay. You do. Okay. Just making sure. Yep. I wouldn't do it for a year just to make more money and then feel like you have to go back to your old job. Right. So I want to make sure your. That career shift was what you wanted in the first place, too.

[Dave Ramsey]

So a written game plan lists these debts, smallest to largest. It sounds like there are four debts, three credit cards in one car. So what is the smallest debt? A credit card. Which one?

[Caller]

That one. I believe it's $12,000.

[Dave Ramsey]

Okay. We're going to pay minimum payments on everything else, and I want you to pay that off in three months.

[Caller]

Okay.

[Dave Ramsey]

And that means no life.

[Caller]

I'm okay with that.

[Dave Ramsey]

It's for a short period of time. Yeah.

[Caller]

Yeah. And stress is gonna. You know, the stress is causing a whole different set of stress. So I'm willing to do whatever it takes to do this, and I know my husband is on board. Yeah. There's some side jobs that I can also do to pay this off. I just.

[Dave Ramsey]

Well, and, you know, here's the thing.

[Rachel Cruz]

And are you guys funding retirement, too? Jacqueline? Because I would pause that.

[Caller]

Yes.

[Rachel Cruz]

Yep. I would pause retirement temporarily. Yep. For two years.

[Dave Ramsey]

For two years till you get this clear, or one year till you get it clear, depending on how big the job is that you get. Get that big job, you might be done really fast. Or both. Both of you pick up some extra income, you might be done really fast. I don't care. Let's just. Let's put it on a schedule where we get it done quickly and knock out the 12 the 12's gone. You don't have that payment anymore. You take that payment that's freed up and everything else we can squeeze out of the budget and we put it on the next one down. And the next one down, the next one down. So you list your debts, smallest to largest, minimum payments on everything but the little one. And you attack the little one with a vengeance.

[Caller]

Okay?

[Dave Ramsey]

And listen, you are a great mom and dad. You've done a wonderful. You took care of your baby and now you're standing up like two grown up adults and saying, what have I got to do to clean up the mess now that I took care of my baby? I love you guys. You're amazing. We want you to go through Financial Peace University, our class, and I want to put you in the premium version of EveryDollar, our budgeting app. I'm going to pay for all of it. Just to say I'm proud of you and I like having people like you in our audience that are good human beings that take care of their family and take responsibility even for messes that are beyond their control. Way to go. You're amazing. You got this. You can do it. It's cyber Monday week and if you're looking for Christmas gifts that actually make a difference, we've got them. Get best selling books like Breaking Free from Broke, Baby Step Millionaires and more for just twelve dollars or audio books for just eight bucks. Now's your chance to give something that'll help your friends and family build wealth, transform their relationships and find work they love. Visit Ramsey today Ramsaysolutions.com store. Rachel Cruz, Ramsey personality, is my co host today. Open phones at Triple 882-55-5225. Erica is in Philadelphia. Hi, Erica. Welcome to the Ramsey Show.

[Erica]

Hi, how are you?

[Dave Ramsey]

Better than I deserve. What's up?

[Erica]

I wanted to get advice on upside down car loan that I'm in. I owe 2864 on it. It's a 2020 Chevy Malibu. I've been trying to get rid of it for a while now, but they're saying the value is down. It now is worth $7,000. And I guess I do have a little bit of damages on it, but they were saying like basically the car, it's just so many of the cars and they're being used as rentals that the value of it isn't that great. Pretty much.

[Dave Ramsey]

Wait a minute. What's a little bit of damage, Erica?

[Rachel Cruz]

Wow.

[Erica]

It's just a bet. The back cover mirrors are off and there's like a couple scratches on It. But it's really nothing that bad. Like.

[Rachel Cruz]

Okay, and when you're saying. They are telling us. Telling me.

[Dave Ramsey]

Who's they?

[Rachel Cruz]

The dealer.

[Dave Ramsey]

The.

[Erica]

Yeah, the dealership.

[Rachel Cruz]

Have you just Kelly Blue booked it at all?

[Erica]

I did. It's priced now, I think between like 8 and 9.

[Rachel Cruz]

Man, that dropped a lot.

[Dave Ramsey]

You must have had a negative. It must have been upside down. Another car, you rolled it into this one?

[Erica]

No, this is a new loan. I had a co signer with great credit because my credit was trash at the time.

[Dave Ramsey]

How long ago did you buy the car?

[Rachel Cruz]

Was it a 20?

[Erica]

22.

[Dave Ramsey]

And what's your interest rate?

[Erica]

11.89.

[Dave Ramsey]

Okay, you may be looking at the wrong number. I think you've got a subprime loan because they're screwing you on the interest. And I think the 21,000 is not the actual payoff. I think it's the total of your remaining payments.

[Erica]

Well, yeah, no. So when I looked at the loan, it said, we. We got the car for 27,000 and some change. I can't remember the exact number, but right now the payoff is $20,000.864.

[Dave Ramsey]

That's the payoff, not the total of remaining payments exactly.

[Erica]

But I've made 13,000, almost $14,000 payments. So I had called them and I was like, why? Where's the money going? And it's all going to interest pretty much.

[Dave Ramsey]

Well, yeah, it's 11%. It's $2,000 a year.

[Erica]

Yeah. So I want a new car. I want to know what to do. Like, should I pay it off and keep it at this point and then just start a new. Like, be on a new lease and not get a new car?

[Dave Ramsey]

How many miles did you put on this car?

[Erica]

It's 95,125 right now.

[Dave Ramsey]

It was 95 when you bought it.

[Erica]

No, it was like 46.

[Dave Ramsey]

Oh, you. But you've run it up to 125,000 miles.

[Erica]

No, it's at 95,000 now. Oh, so like 50.

[Dave Ramsey]

There's something wrong with these numbers. Okay. Because Chevy Malibu has not dropped 70% in value during that period of time. During that period of time. Okay. So are you. Look, when you pulled up Kelley Blue Book, did you look at trade in.

[Erica]

Or private sale training, I believe?

[Dave Ramsey]

Yeah, I think you did. Okay, so maybe you could sell the car, private sale, for. Let's call it 12,000. Okay.

[Erica]

Okay.

[Dave Ramsey]

And then you would have to cover the difference. And so you'd still need $9,000 to do that. Do you have any money at all? I'm sure you don't.

[Erica]

Not that, no.

[Dave Ramsey]

How much do you have?

[Erica]

2,000 in savings and then a thousand in the checking.

[Dave Ramsey]

Okay, what do you make?

[Erica]

50,000 a year.

[Dave Ramsey]

Okay. All right. Yeah, you do need to get out of this. But, you know, basically, if you went to the credit union and you borrowed $9,000, $10,000 to get $1,000 car and cover the difference and sell the thing for 12 to an individual, that would get you out of it, but you still have payments on $9,000 instead of $20,000. The thing I might do instead is I might just go make an extra 20,000 next year by. And pay it off in one year by working all the time like a maniac, like six jobs and then get this off of you.

[Rachel Cruz]

She goes, oh, man.

[Dave Ramsey]

Yeah.

[Rachel Cruz]

Well, I mean, do you have any other areas?

[Dave Ramsey]

Listen, I don't. It depends on. You don't have to do that, Erica. But you're trapped. And the way you get out of a trap is it hurts.

[Rachel Cruz]

Yep.

[Erica]

Yep.

[Rachel Cruz]

Do you have any other debt, Erica, or is it just this?

[Erica]

School loans.

[Rachel Cruz]

How much are Those?

[Erica]

Close to 200,000. I think it's 189,000. I know.

[Rachel Cruz]

What's the degree in masters?

[Erica]

Well, I'm in school now for my master's in marriage and family therapy.

[Rachel Cruz]

Is the 180 include that masters? Is that the total once you get out, or will there be more?

[Erica]

It might be exactly at 2,000 when I get. I'm in my last year.

[Rachel Cruz]

200,000. Okay. And what are you doing now for a job?

[Erica]

I'm a case manager at a rehab.

[Rachel Cruz]

Okay. Okay. Yeah. Erica, it's going to be a. It'll be a.

[Dave Ramsey]

It's going to be a long road.

[Rachel Cruz]

Long road. But. But can I just say, though, the number one, we. We hear people with these numbers, okay. And they get out. It takes. It does take years, but this is going to be a total change of lifestyle for. For the next probably five years.

[Dave Ramsey]

Yeah. And you got to quit just every time you want to do something, going freaking borrowing to do it.

[Erica]

That's true.

[Dave Ramsey]

It's killing you. I mean, you're a quarter of a million dollars in debt. You gotta stop. I mean, you're like an alcoholic. You gotta stop.

[Rachel Cruz]

Well, it's all this. It's all student loans. I mean, no, it's not.

[Dave Ramsey]

It's a. It's 11 12% loan on a car. Yeah, she impulsed and then scratched it after she went out to happy hour. Stop it. No, stop, stop, stop, stop, stop. Living like this. You're a case manager. You see people doing stuff. Stop it. You've got to say, no more debt. Next time I want a car, the answer is no. I don't need a car so bad. I got an 11.8% interest rate. What that tells me is I know enough about the car business. They not only screwed you on the loan, they screwed you on the car when they sold it to you because you paid premium for both. They saw you coming a mile away. They said, here comes Erica, we gonna take her. That's exactly what they saw. You got had kid. Same thing they did when they told you $200,000 was a good deal to get a master's to be marriage and family therapy. That's a complete screw job, too. You paid double what you should have paid for that degree. And you got us. You got to say, no more borrowing. My life is not better. When I borrow to make my life better, it doesn't do it. You got to stop at kiddo. So if I'm you, I'm going to go get that degree, finish that thing up, pass your dad gum bars, get out there, get your dad gum. Income up to 100k, live on nothing and raise your right hand and swear I am never borrowing again because it has not brought me blessings. And yes, you have to work all the time. That's the way it is. That's how you get out. You got to pay a price to clean up your dad gum mess. That's the way this works. No other way around it, kiddo. You got to do this. You got to lean into it. This is what they teach you in the field you are studying. You can't keep doing the same thing over and over again. Expect a different result. That's the definition of insanity. That's counseling 101.

[Rachel Cruz]

Well, and I think you made a good point earlier that and this is good for people to, especially young people that are entering into adulthood of buying new cars, may getting advanced degrees, getting job. Like this whole thing is, don't take the one offer out there, the one car, and go and take exactly what they say, the one school you look at and get accepted to. And you just take. Right? There's a life of options out there. And I don't think people do that, right? They, you know, they get into a situation and they just, okay, this is great. This is what they're offering and I'm just going to sign my name and do it. And so thinking through this stuff, getting.

[Dave Ramsey]

Multiple options, when your mind tells you there's only One way to do it, your mind is lying to you and Erica.

[Rachel Cruz]

That could be your situation, right? You, you go and come into this car loan, you get accepted to a school and you know, you accept it. It's just this one option path that a lot of people take that ends up usually not with a great deal. Like you were saying, getting screwed in the car, whole thing and the degree. And you're not, you're not roiing things, you're not looking at other options and have five or six different things in front of you to say, what's the better deal? So guys, forward thinking.

[Dave Ramsey]

All education is not good. Some education is overpriced crap. Just to go to school, you gotta go to school. No, you don't. Being stupid when you're doing your education is a bad plan. I'm not saying Erica was completely. But she got taken. It's bad. I'm sad for her, what a horrible situation she's in. I'm angry for her. This is the Ramsey Show.

[Rachel Cruz]

Sa.

[George Camel]

Hey, you're still here. What are you doing? You do know that the rest of today's show is playing right now over on the Ramsey Network app, right? All you gotta do to finish the episode is search Ramsey Network in the app store, Google play store, or just click the link in the show notes to download the app for free. Yep, you heard me right, for free. Then right there on the home screen, you can watch the rest of today's show. Bada bing, bada boom. All right, I'm getting out of here. Enjoy. We'll see you on the app.